Understanding Statutory Breathing Space (Debt Respite Scheme)
At Lowell, we know that debt isn’t a straightforward journey and sometimes you may just need some time to figure things out.
If you’ve been looking into this yourself, then you might have come across references to statutory breathing space, or the Debt Respite Scheme, introduced by the government in 2021. That’s why we’ve created this guide going through how the two breathing space schemes work under the Debt Respite Scheme, how you can apply, and the different ways it can offer protection.
Lowell Financial Ltd do not provide financial advice. This content is intended to be an impartial guide about breathing space, also known as the Debt Respite Scheme.
What is Statutory Breathing Space (Debit Respite Scheme)?
Statutory Breathing Space, also referred to as the Debt Respite Scheme, is a government-backed scheme to help individuals struggling with their debts. It’s intended to be a short-term option that gives you temporary legal protection from your creditors, which are the people you owe money to.
Statutory Breathing Space is not a formal debt solution, but instead allows you time (60 days) to figure out what your next steps could be in resolving your outstanding debts. If you want to find out more about different types of debt solutions, you can read our guide on the different types of debt solution.
Once approved and whilst your account/s are included in the statutory breathing space, most collection and enforcement processes will be paused which includes freezing most charges, interest, and fees on your debts and also prevents you from being contacted by creditors about your eligible debts. To find out more about eligible debts, we’ve got a dedicated section on ‘What debts can and can’t be included in statutory breathing space?’.
This gives you the time, space, and freedom to work with an advice agency to help you find an appropriate solution that will help you sort out your debt in the long term. If you’re not sure where to start or which solution is best for you, there are lots of organisations that can offer you debt help and support.
It is important to know that only a debt advice provider who is authorised by the Financial Conduct Authority (FCA) to offer debt counselling or a local authority can start a breathing space application. To find out if a debt advice provider is authorised by the FCA, you can check the FCA’s Financial Services Register online.
There are two different types of breathing space schemes available, which we will explore further below. Alternatively, you can read the official GOV UK guidance on the debt respite scheme to find out more.
For those living in Scotland, there is a separate debt ‘breathing space’ scheme which is similar called a Statutory Moratorium. Currently, there is no equivalent in Northern Ireland.
Statutory Breathing Space
Breathing space often refers to the standard statutory scheme as it is the more common option of the two types of hold. The Statutory Breathing Space scheme is open to anyone struggling with problem debt. You can find out more about the specific eligibility in the next section on ‘Can I apply for either breathing space scheme?’.
Statutory Breathing Space provides legal protection from creditors for up to 60 days and means that you’re protected from most enforcement action. This could include a warrant, a writ, or applying to the DWP for a new third-party deduction. During this time, you won’t be contacted or have to make payments towards your debt during this time.
Mental health crisis breathing space (MHCBS)
Then there’s the Mental Health Crisis Breathing Space (MHCBS) which is specifically for individuals who are receiving mental health crisis treatment. In comparison to the standard scheme noted above, the hold lasts as long as the individual is receiving mental health crisis treatment, plus an additional 30 days therefore is not capped at 60 days.
Can I apply for the breathing space debt scheme (statutory and mental health crisis)?
Whilst both breathing space schemes are there to help those struggling with their debt, there are some criteria that you need to meet to be eligible to be able to access the scheme. For instance, to be able to apply for Statutory Breathing Space you must:
• Live in England or Wales
• Have at least one qualifying debt
• Not have an individual voluntary arrangement (IVA), debt relief order (DRO), interim order, or be an undischarged bankrupt when applying
• Not have entered the Breathing Space scheme in the last 12 months (this doesn’t include the mental health crisis breathing space)
Additionally, to be eligible for mental health crisis breathing space you must:
• Be getting crisis care from a specialist mental health team in a hospital or the community.
• Have been detained, aka sectioned, under the Mental Health Act
• Have been removed to a space of safety under the Mental Health Act.
How to apply for breathing space (statutory and mental health crisis)
To enter into statutory breathing space, you must apply through an FCA regulated debt adviser. For instance, organisations like StepChange can submit your application to the Insolvency Service, who manages the scheme. All applications will be looked at, but statutory breathing space isn’t always the best option for everyone and their circumstances.
When applying, you’ll be asked to provide basic details such as your name, date of birth, address, and creditor details (information about how much you owe and who you owe it to). It can also be helpful to provide additional details relating to your debt including the creditor’s address, account or reference number, and any collection agency details.
Similarly, you can only apply for mental health crisis breathing space with the support of an Approved Mental Health Practitioner (AMHP). They will need to complete an official evidence form on your behalf submitted to a debt adviser which shows you’re currently receiving mental health crisis treatment. You can get in touch with an AMHP by speaking to one of your healthcare professionals.
What debts can and can’t be included in breathing space?
You will be able to include most of your debts in breathing space and when applying it’s important that you mention all of your eligible debts. This includes all personal debts and liabilities except for secured debts as well as any arrears on debts that already existed at the time of applying. Secured debts refers to when you borrow money, normally £10,000 or more, against assets you already own such as your home or car.
Debts that are likely to qualify for the statutory breathing space scheme include:
• Credit cards
• Store cards
• Personal loans
Similar to bankruptcy and other formal debt solutions, there are some debts that you can’t include in breathing space such as:
• Student loans
• Fraudulent debts
• Magistrates’ court fines
• Mortgages or car finance (unless you’ve fallen into arrears)
• Advance payments of Universal Credit
If you forget to mention any eligible debts when applying for statutory breathing space, these can be added at a later date. Any debts added afterwards will only be protected from the date added for the remaining time of your scheme. If you’ve got joint debts that are eligible, then these will also be included.
How often can you enter the breathing space schemes (statutory and mental health crisis)?
For the standard statutory breathing space, you can only enter once every rolling 12 months.
This is different when it comes to the Mental Health Crisis Breathing Space which you can enter an unlimited number of times. The only requirement is that you must be receiving mental health crisis treatment when applying.
You can also be in a mental health crisis breathing space along with the additional 30 days then go straight into the statutory breathing space.
Does breathing space show on a credit report (statutory and mental health crisis)?
No, credit reference agencies won’t be aware that you’re on a breathing space scheme, and this won’t be shown or have a direct impact on your credit report. Creditors will continue as normal when reporting any missed payments to credit reference agencies which could have an impact on future borrowing.
Ways the Debt Respite Scheme can offer protection
The purpose of the Debt Respite Scheme is to provide you with short-term legal protection from your creditors whilst you look into more long-term solutions. Besides having your payments temporarily paused, there are other ways you can be protected.
Does the breathing space scheme stop bailiffs (statutory and mental health crisis)?
Yes, once you have the breathing space scheme in place this will protect you from bailiff action being taken.
Bailiffs can also be referred to as enforcement agents or County Court bailiffs. They have the legal power to do so either by seeking payment or through the sale of goods.
Bailiff action can’t be started against you whilst you’re in the statutory breathing space scheme nor are they allowed to try to take control of your belongings. However, if you’ve already had goods taken prior, then they can still sell these, but they can’t charge you for any storage costs.
If you’re still curious about what bailiffs can and can’t do outside of breathing space, you can read our guide on how to deal with bailiffs for more information.
Can breathing space prevent court action (statutory and mental health crisis)?
A creditor won’t be able to start court action against you under breathing space regulations. They also can’t take further enforcement action to try and recover money even if they began to do so prior to you entering the scheme. For more information on this, you can read National Debtline’s factsheet on breathing space.
Can breathing space protect your home (statutory and mental health crisis)?
It’s important to remember that breathing space doesn’t pause any payments relating to your property and you will still have to pay any of your normal mortgage or rent costs, also known as your ongoing liabilities. However, it can offer protection for your home in other ways.
If you’re renting your home, a landlord usually won’t be able to try and take action to evict you for rent arrears. Alternatively, if you’ve bought your home, mortgage lenders typically can’t try and repossess your home.
What happens after breathing space (statutory and mental health crisis)?
Once your statutory or mental health crisis breathing space period is over, any protections will be lifted. As you’ll have been working with an advice agency to figure out your next steps, your creditors will start contacting you again. They can also resume or start legal proceedings and add any interest, fees, or charges to your debts.
That’s why, during this time, it’s important to seek guidance from a debt adviser to find a longer-term solution once your statutory breathing space has ended.
If you need space from your Lowell debt, we’re here to help
If you’ve got a debt with Lowell and are struggling to make your payments, please get in touch with us. Our team are always there to listen and see how we can work with you so that you can continue on your journey to becoming debt-free with Lowell.
This may include pausing your account so that you can take some time to sort out your finances and seek debt guidance. Whilst we can’t offer advice ourselves, we’re more than happy to put you in touch with someone who can.
First published: 29th September, 2023